News Flash: Tingling Applies to Succeed Goodman


Manhattan Supreme Court Justice Milton A. Tingling has submitted an application to the Appellate Division in Manhattan to succeed Norman A. Goodman as New York County Clerk, according to three independent sources. The Appellate Division, First Department could take a vote on Goodman’s replacement as early as its next regularly scheduled conference this coming Monday,  Nov. 24.

Tingling had triggered a series of events that resulted in the forced departure of James A. Rossetti, who was Goodman’s top aide and heir apparent. (See WiseLawNY, March 6, 2014).

In late July 2013, Tingling brought a photo of a racist image that had been posted in public view in the County Clerk’s Office to Justice Sherri Klein Heitler, the administrative judge in charge of civil cases at the Supreme Court in Manhattan. Over the next six months, the court system’s Inspector General’s Office conducted an investigation, which found that Rossetti had failed to take swift action to remove the offensive images and had misled investigators.

Relying on those findings, Deputy Chief Adminsitrative Judge Fern A. Fisher, who is in charge of courts in New York City, suspended Rossetti for 90 days and informed him that, upon his return, his salary would be cut by $30,000 and that he would be barred from entering the Manhattan courthouse on official business. Faced with that stern punishment, Rossetti submitted his resignation.

With Rossetti out of the picture, the biggest question became, who would replace Goodman when he retired.  Goodman was 90 years old and had been County Clerk for 45 years when Rossetti resigned in December, 2013. Rossetti had been the number-two man in the office since 1985. In 2000, Rossetti was given the title of Chief Management Analyst and was paid an annual salary of $145,000 in 2013. Goodman’s annual salary is $174,000, the same as is paid to Supreme Court justices.

In the months following Rossetti’s resignation, there were rumors at the 60 Centre St. courthouse that Tingling had expressed an interest in Goodman’s position. When I asked him about the rumors in connection with the March 6 article, he sidestepped the question, and instead answered, on the record, “I am running for re-election. My sole objective is to be re-elected.” Tingling was elected to a second term last November.

Tingling did not return several calls placed to him late Thurday afternoon.

The New York Post reported in October that New York County’s democratic leader, Assemblyman Keith Wright, was eying the post but two sources said he has not submitted an application. By statute, the Appellate Division, First Department appoints the County Clerks in New York County and the Bronx.

A well placed source reports that 60 candidates have submitted applications to succeed Goodman, seven of whom have been interviewed by the First Department. In addition to Tingling, the source said, Bronx Justice Richard Lee Price and Mark Brantley, who is the New York County office’s administrator, are among those who have been interviewed. Both Price and Brantley declined to comment.

Evidence Cuts Two Ways

Tingling’s pursuit of the job brings into sharper relief an issue I tried to flesh out in the March 6 article. Was Tingling trying to rid the courthouse of an inflammatory racial image as his supporters contended? Or was he seeking to push aside the heir apparent to open a path for himself or someone else as Rossetti’s backers maintained?

OCA Inspector General Sherrill Spatz’s report remains out of public view. The only inkling of what it contains comes from unattributed sources in the New York Law Journal’s story published about Rossetti’s resignation (Dec. 18, 2013). The Law Journal reported that the investigation faulted Rossetti, as reported above, but also concluded that he had not been involved in displaying the offensive images.

From the narrative I was able to develop in the March article, it appeared that the members of District Council 37, the union which represents workers in the County Clerk’s records room, took photographs of the offensive posts and forwarded them to Tingling. An article in the District Council 37 newspaper, which was published in March, said as much. It noted that several workers had taken photos with their cellphones of “racist” images of “monkeys and apes” and had prompted the Inspector General’s investigation by complaining to “the union and state Supreme Court Justice Milton Tingling.”

Tingling then promptly informed his administrative judge, Heitler, about the inflammatory images on his cellphone. After summoning Tingling and Rossetti to her chambers, Heitler dispatched Rossetti to the records room, which is in the basement of the courthouse, to inspect the posted images. Rossetti reported back that he did not see any offensive images.

I was troubled that Rossetti was unable to find the offensive images. They were indeed inflammatory. One of the images contained a drawing from a children’s book of an ape and a bird with “Nigger be like” and “I love me a bitch bird” scrawled across it.

It is altogether plausible that a worker (the records room staff is mostly black) was so enraged by the images that they were ripped down during the brief interval between the forwarding of the photo to Tingling’s cell phone and Heitler’s sending Rossetti to inspect the record room wall.

On the other hand, a source with no ties to either Rossetti or Tingling told me that the racist images had been posted in public view “for quite some time,” possibly as long as a year. That leaves two questions lingering: Why had  the images  been allowed to remain on the wall so long? Why did the union and Tingling wait until late July 2013 to bring the issue to a head.

One thing is clear. Once the Inspector General’s report was complete, Fisher moved swiftly to punish Rossetti. She summoned him to her chambers on Friday, Dec. 13, 2013, and, without providing either Rossetti or his lawyer a copy of Spatz’s report, informed Rossetti of his punishment. She gave him until the following Monday at 5 p.m. to advise her of whether he would accept the punishment.

A court officer in plain clothes then escorted Rossetti three blocks down Centre Street from the Civil Court, where Fisher has her chambers, to the Supreme Court where Rossetti had his. The officer remained with Rossetti while he gathered his belongings and exited the courthouse.

Rossetti submitted his resignation on Dec. 16. ahead of the 5 p.m. deadline.


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News Flash: Tingling Seeking To Succeed Goodman

Manhattan Supreme Court Justice Milton A. Tingling has submitted an application to the Appellate Division in Manhattan to succeed Norman A. Goodman as New York County Clerk, according to three independent sources. The Appellate Division, First Department could take a vote on Goodman’s replacement as early as its next regularly scheduled conference  this coming Monday,  Nov. 24.


Questions about Goodman’s successor arose in the summer of 2013 when his heir apparent, First Deputy James A. Rossetti, was forced to step aside after the Office of Court Administration Inspector General’s Office concluded that he had not acted vigorously enough to insure that a racist image was taken down from a public wall of the office.

Goodman has held the post for the past 46 years, and Rossetti was the second in command for 28 years before he was forced to retire.

As I reported in March, Tingling brought the issue of the racist post to the attention of Justice Sherry Klein Heitler, the administrative judge of the Supreme Court in Manhattan (WiseLawNY, March 6, 2014). That started a process which six months later ended in Rossetti’ forced removal in December, 2013.

The New York Post reported in October that New York County’s democratic leader, Keith Wright, was eying the post but two of the sources said he had not submitted an application. By statute, the Appellate Division appoints the County Clerk in New York City.

Tingling could not be reached for immediate comment.

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News Flash: Tolling Upheld for ‘Good Faith’ Violations

On Wednesday, Oct. 29, the Appellate Division in Brooklyn, for the first time, ruled that the forfeiture of interest and attorney fees is an appropriate sanction for banks that fail to honor their statutory obligation to negotiate in good faith with homeowners facing foreclosure.

The Second Department’s unsigned unanimous decision in U.S. Bank N.A. v. Williams, 2014 NY Slip Op 07349, is the first from any appeals court in the state to approve a penalty for a bank’s failure to negotiate in good faith at mandatory settlement conferences. The conferences were first required in 2008 in the wake of the nation’s economic meltdown. Civil Practice Law and Rules Section 3408 was amended a year later to require banks to conduct their negotiations in good faith. The new section added in 2009—3408(f)— did not specify a remedy for a bank’s failure to negotiate in good faith.

Undeterred by a clear-cut remedy, the banks’ handling of the settlement conferences has been problematic. In the last two years, 30 judges throughout the state have found banks to have failed to negotiate in good faith, often finding that the negotiations have stretched out for a year or longer or that loan reductions were approved only to later be withdrawn or that banks often either lost homeowners’ documents or required that they be resubmitted because they had grown outdated as the negotiations had dragged on.

Another measure of the depth of problems New York homeowners have encountered is found in a motion the New York State Attorney General’s Office has pending to force Wells Fargo Bank to comply with processing deadlines for mortgage-relief applications set in a 2010 nationwide settlement. The Attorney General’s motion in U.S.A. v. Bank of America, 12-cv-361 (District of Columbia) cited 200 instances in which Wells Fargo had failed to meet the settlement’s processing deadlines in cases involving 97 New York families.

The facts in the Second Department’s case were quite typical of those cited in prior “bad faith” findings and the Attorney General’s motion. Homeowner Fay Williams attended 10 conference sessions that had stretched out for more than year before Referee Deborah Goldstein, who supervised the conference process. Ultimately, Goldstein recommended that U.S. Bank N.A. be found not to have negotiated in good faith and that sanctions be imposed.

Williams’ case was also typical in that her mortgage is now owned by a syndicate, which has formed a mortgage pool as security for bonds it had issued to raise capital. In the 30 bad faith cases surveyed,[1] often the holder of the mortgage was a syndicate like U.S. Bank. As was typical in those rulings, U.S. Bank waited until negotiations had sputtered for 13 months before advising either the homeowner or the referee that the legal documents forming the pool precluded it from altering either the interest or duration of the mortgages it owns.

In their ruling, the four Second Department judges dryly stated that, under those circumstances— which were reflected in many of the “bad faith” rulings—Brooklyn Justice Richard Velasquez “providently exercised” his discretion in requiring the syndicate to forfeit interest and attorney fees, which it would otherwise have been entitled to.

The panel—which consisted of Peter B. Skelos, Sheri S. Roman, Sylvia O. Hinds-Radix and Hector D. LaSalle—also refined Velasquez’ order and directed that fees and interest be tolled from the date of the initial conference in June, 2010 until the conferences resume under the panel’s mandate. That reflects a period, which has already extended for more than four years.

Prior to the posting of this article, Pamela Ann-Marie Walker, the attorney  who handled Williams’ case at the conference and trial levels through the Brooklyn Bar Association’s Volunteer Lawyers Project, was unable to provide an estimate of how much interest is currently at stake under the panel’s tolling order.

In the last two years, the Second Department has been edging toward the approval of a remedy for good faith violations. In 2013, a panel in the case of Wells Fargo Bank v. Meyers, 108 A.D.3d 9, approved the notion that judges have the authority to approve a remedy, just not the one ordered by the trial judge in that case (the trial judge’s order had required specific performance of a trial modification which the bank had subsequently withdrawn). The Court in Meyers held off endorsing any specific remedy but it listed a number of possibilities.

In July of this year, another panel in U.S. Bank v. Sarmiento, 2014 NY Slip Op 05533, let a order tolling interest and fees stand even though it expressly stated that a legal technicality prohibited it from deciding whether judges have the power to order tolling.

The length of the delay attributable to the bank’s bad faith and the amount of the mortgage debt in Sarmiento is roughly analogous to that in the Williams case. A. David Fuster, who represented the homeowner in Sarmiento, was quoted in the New York Law Journal (Aug. 4, 2014) as estimating that the tolled interest for his client amounted to approximately $300,000.


[1] [1] See Wise, “Panel Shifts Toward Remedy in Sarmiento, ”New York Law Journal, Aug. 29, 2014, page 6, footnote 1. Since Aug. 29, I have added six more rulings finding that banks failed to negotiate in good faith: MERS v. Lieberman, 29970/09, decided 9/12/14, (Battaglia, J. Brooklyn); US Bank NA v. Garcia, 32313/2009, decided 9/22/14, Kurtz, J. Brooklyn; and U.S. Bank v. Smith, 34/2010, decided July 5, 2013, Solomon, J. Brooklyn; U.S. Bank v. Williams, 3685/10, Velasquez, J. Brooklyn, decided Nov. 18, 2013; Wells Fargo v. Ayala, 19783/12, decided Aug. 20, 2014, Pineda-Kirwan, J., Queens; and LaSalle Bank v. Dono, 2014 NY Slip Op 24224, decided Aug. 12, 2014, Spinner J., Suffolk).

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Dan Wise’s Article in New York Law Journal on Import of Sarmiento


To: Readers of WiseLawNY

From: Dan Wise

Date: Sept. 3, 2014


On Friday Aug. 29, the New York Law Journal published my analysis that the Appellate Division, Second Department’s ruling in U.S Bank N.A. v. Sarmiento, 2014 NY Slip Op 05533, heralds an era of greater protection for homeowners facing foreclosure.

The outcome in Sarmiento was somewhat muddy. The Court did not disturb a Brooklyn judge’s order requiring a lender topossibly forfeit as much as $300,000 in interest and attorneys fees for failing to bargain in good faith with a homeowner at a mandatory, court-supervised settlement conference. Nor, however, did the Court affirm the judge’s order.

Nonetheless, the ruling reflects a significant shift in the Court’s approach to enforcement of a 2009 state law requiring lenders to negotiate in good faith over a reduction in a homeowner’s mortgage payments before moving forward with a foreclosure case.

That conclusion is supported by the tone, content and context of the Sarmiento ruling. The good-faith statute is silent on the question of remedies for violations, and a year ago the Second Department had issued a full-throated plea for guidance from the Legislature and the Judiciary. Nothing has changed in the last year.

During the five years since enactment, the Court had issued several rulings knocking down possible remedies but never put its imprimatur on a remedy. The Sarmiento case presented the first test of a remedy that was commensurate with bank misconduct—the forfeiture of interest and fees during periods in which lenders had failed to act in good faith.

During the intervening years, there has been a growing body of case law at the trial level in which judges have expressed extreme displeasure with lenders’ handling of the conferences, which have resulted in lengthy delays of two years or more. By my count, since the start of 2013, 21 judges in nine counties have found lenders to have violated the good-faith requirement.

My article appears on page 6 of the Aug. 29 Law Journal. Subscribers to the Law Journal can get direct electronic access to the article by logging in and clicking on this link:

When non-Law Journal subscribers click on the above link, they will be asked to “register” for the Law Journal. Once you register, you should be taken directly to the article. Persons registering are allowed access to five Law Journal articles every 30 days before they will hit a paywall.

If you encounter problems, please send me an email, and I will try to straighten it out. There is a more complicated way that non-subscribing registrants can access the article.



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US Bank N.A. v. Sarmiento (2nd Dept. July 30, 2014)




US Bank N.A. v Sarmiento
2014 NY Slip Op 05533
Decided on July 30, 2014
Appellate Division, Second Department
Leventhal, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.



WISELAWNY NOTE: The decision does not mention the name of the referee who handled this case. She was Deborah L. Goldstein.


Decided on July 30, 2014 SUPREME COURT OF THE STATE OF NEW YORK Appellate Division, Second Judicial Department

(Index No. 11124/09)

[*1]US Bank National Association, etc., appellant,vJose Sarmiento, respondent, et al., defendants.


APPEAL by the plaintiff, in an action to foreclose a mortgage, from so much of an order of the Supreme Court (Leon Ruchelsman, J.), dated December 19, 2011, and entered in Kings County, as, upon a finding that the plaintiff failed to negotiate in good faith during settlement conferences conducted pursuant to CPLR 3408, granted the motion of the defendant Jose Sarmiento to bar the plaintiff from collecting interest or fees that accrued on the subject loan since December 1, 2009, to bar the plaintiff from recovering from him any costs or attorneys’ fees it incurred in this action, and to direct the plaintiff to review the issue of whether the subject loan may be eligible for a loan modification pursuant to the Home Affordable Modification Program by employing correct information and without regard to interest or fees that have accrued on the subject loan since December 1, 2009.


Hogan Lovells US LLP, New York, N.Y. (David Dunn and Nathaniel E. Marmon of counsel), for appellant.

Fuster Law, P.C., Long Island City, N.Y. (J. A. Sanchez-Dorta of counsel), for respondent.



On appeal in this mortgage foreclosure action, the plaintiff contends that the Supreme Court erred in determining that it failed to negotiate in good faith during mandatory settlement conferences conducted pursuant to CPLR 3408, and that, in any event, the Supreme Court lacked the authority to impose any sanctions against it on the ground that it violated the “good faith” requirement of CPLR 3408(f). In addressing these contentions, we set forth the proper standard for determining whether a party acted in good faith pursuant to CPLR 3408(f). Further, we hold that the Supreme Court properly concluded that the plaintiff failed to negotiate in good faith and that the Supreme Court had the authority to sanction the plaintiff for that failure.

In May 2009, the plaintiff, as successor trustee to Bank of America, National Association (Successor by Merger to LaSalle Bank National Association), as trustee for Morgan Stanley Mortgage Loan Trust, 2007-2AX, commenced this action in the Supreme Court, Kings County, to foreclose a mortgage secured by residential property located in Brooklyn. In the complaint, the plaintiff alleged that the defendant homeowner, Jose Sarmiento, defaulted on the subject mortgage by failing to make the monthly payment due on October 1, 2008. The plaintiff elected to call due the entire amount secured by the mortgage, in the principal sum of $578,388.75, plus interest at an annual rate of 8.25%, accruing from September 1, 2008. Issue was joined by Sarmiento’s service of a pro se verified answer dated July 17, 2009, which was accompanied by a [*2]notice to produce documents.

In an affidavit, Sarmiento averred that, in May 2008, he lost much of his monthly income and that, as a consequence, he was unable to make his monthly mortgage payment due on October 1, 2008, and the payments due thereafter. In September 2008, Sarmiento contacted America’s Servicing Company (hereinafter ASC), the mortgage servicing agent of the lender, and a wholly owned subsidiary of Wells Fargo Bank, N.A. (hereinafter together ASC/Wells), in order to discuss a loan modification. Sarmiento was told that he did not qualify for a loan modification because he had insufficient income. In February 2009, Sarmiento found an additional tenant for the subject property, and began receiving monthly rental income in the sum of $4,652. According to Sarmiento, notwithstanding his augmented income, ASC/Wells repeatedly refused to modify his loan.

In September 2009, this matter was referred to a Court Attorney Referee for a mandatory settlement conference pursuant to CPLR 3408. Sarmiento initially appeared pro se at the settlement discussions, and later obtained pro bono counsel. ACS/Wells, through their counsel,[FN1] appeared at the settlement discussions on behalf of the plaintiff. From September 14, 2009, to January 14, 2011, 18 settlement conferences were held. What transpired during the settlement conferences is detailed in the report of the Court Attorney Referee, dated April 20, 2011.

The Court Attorney Referee’s Report

The report of the Court Attorney Referee set forth the following facts. On October 29, 2009, Sarmiento submitted to ACS/Wells a Home Affordable Mortgage Program (hereinafter HAMP) application [FN2]. On November 18, 2009, upon the request of ASC/Wells, Sarmiento submitted updated financial documents. According to the Court Attorney Referee, Sarmiento met the basic criteria for HAMP eligibility since: (1) the subject property was a one-to-four-family residence; (2) Sarmiento’s monthly mortgage payment of principal, interest, property tax, and insurance exceeded 31% of his gross monthly income; and (3) the principal balance of the loan was equal to or less than $729,750.

At a settlement conference held on November 30, 2009, ASC/Wells confirmed that it had received Sarmiento’s HAMP application and his updated financial documents, and represented that it would make a decision on the application within one week, even though it had 30 days to make that decision. Upon her review of Sarmiento’s income, the Court Attorney Referee directed him to set aside the sum of $2,000 per month beginning December 1, 2009, to demonstrate his good faith and his ability to make modified mortgage payments and, if necessary, to use as a down payment on a non-HAMP, traditional loan modification.

First HAMP Denial

By letter dated January 12, 2010, ASC/Wells denied Sarmiento’s HAMP application on the ground that he did not reside at the subject property as his primary residence. After Sarmiento asserted that there was no factual basis for ASC/Wells to have concluded that the property was not his primary residence, ASC/Wells conceded that Sarmiento resided at the property.

At a settlement conference conducted on February 2, 2010, ASC/Wells reported that Sarmiento’s HAMP application was complete and still under review. ASC/Wells asserted, however, that it required a broker’s price opinion (hereinafter BPO) to determine the value of the property, which was necessary before a Net Present Value (hereinafter NPV) test could be conducted under HAMP. The NPV test would determine whether a loan modification or a foreclosure sale was more lucrative to the mortgage lender/investor.

Second HAMP Denial

By letter dated April 2, 2010, ASC/Wells advised Sarmiento that his HAMP application was again denied, this time on the ground that an affordable monthly payment amount—equal to or less than 31% of gross monthly income—could not be reached. In an email message from ASC/Wells’s counsel to Sarmiento’s counsel, ASC/Wells stated that Sarmiento’s HAMP application was denied because of a monthly income deficit of $1,100. According to the [*3]Court Attorney Referee, “Servicer ASC/Wells was evaluating . . . Sarmiento for a [HAMP] modification using the wrong income figures, although the defense thoroughly documented the employment and rental income that . . . Sarmiento and his wife earned each month.” By letter dated April 7, 2010, Sarmiento’s counsel informed ASC/Wells of this error, and referred ASC/Wells to Sarmiento’s previously submitted pay stubs, bank statements, and rental agreements, which reflected a gross monthly income of $6,303. Sarmiento’s counsel further requested a denial notice with greater specificity than set forth in the denial letter of April 2, 2010. Pursuant to Sarmiento’s rights under HAMP, his counsel requested that ASC/Wells produce the inputs and data that ASC/Wells used in performing the NPV test.

In an email message dated April 9, 2010, ASC/Wells advised Sarmiento’s counsel that it had never conducted an NPV test on Sarmiento’s HAMP application because the file had not reached the NPV calculation phase, and that the denial was “due to [an inability to] reach an affordable payment.” By letter dated April 12, 2010, Sarmiento’s counsel reiterated his objections to the HAMP denials, and requested “that ASC/Wells comply with HAMP guidelines and complete its modification review.”

At a settlement conference held on April 13, 2010, and by letter dated April 22, 2010, Sarmiento requested a proper review of his HAMP application. According to the Court Attorney Referee, ASC/Wells replied that it “had misplaced income documentation” and that some other documentation had become “stale.” As a consequence of its characterization of the status of the documentation, ASC/Wells requested that Sarmiento submit a new HAMP application. The Court Attorney Referee instructed Sarmiento’s counsel to resubmit and update the HAMP application, and directed “ASC/Wells to escalate and expedite the HAMP review.” Sarmiento submitted an updated HAMP application to ASC/Wells on April 26, 2010.

Third HAMP Denial

At a settlement conference held on May 11, 2010, ASC/Wells reported that it had “escalated” review of Sarmiento’s HAMP application, and that such review was still incomplete. Two days later, however, ASC/Wells informed Sarmiento’s counsel, in an email message, that it was again denying his HAMP application “due to not being able to reach affordability.” The email message further stated the “this property is not affordable,” and requested Sarmiento’s counsel to “refer the borrower to our liquidations department for further foreclosure prevention options.” According to the Court Attorney Referee, the email message dated May 13, 2010, “failed and refused to demonstrate that Sarmiento was ineligible for a HAMP modification.”

By letter dated May 28, 2010, Sarmiento’s counsel requested more specific information about the denial, and again demanded the inputs and data that ASC/Wells used to conduct the NPV test in connection with Sarmiento’s HAMP application. ASC/Wells did not provide the requested information. The Court Attorney Referee observed that, “[a]lthough HAMP guidelines require production of the NPV inputs upon request so that borrowers can review the propriety of a denial and challenge the accuracy of the NPV inputs, Services ASC/Wells ignored[ ] the written requests [from Sarmiento’s counsel] for the data, and failed to produce the NPV values. Indeed, ASC/Wells failed to demonstrate that an NPV test had, in fact, been run.”

As set forth in the report of the Court Attorney Referee, on June 2, 2010, Sarmiento filed a formal complaint against ASC/Wells with the HAMP support center on the ground that ASC/Wells refused to properly assess his HAMP application. On June 8, 2010, the HAMP support center advised Sarmiento that ASC/Wells had denied his HAMP application because he had $25,000 in liquid assets, which exceeded the maximum limit. The report of the Court Attorney Referee noted, however, that the $25,000 reflected funds which she had previously directed Sarmiento to set aside.

Nevertheless, at a settlement conference held on July 1, 2010, ASC/Wells reported that Sarmiento’s HAMP application was “still under review,” and that this review would be completed no later than two weeks after that date. ASC/Wells added that the funds that Sarmiento set aside at the direction of the Court Attorney Referee would not affect his HAMP application. Sarmiento’s counsel made a third request for the inputs and data that ASC/Wells used in the NPV test; ASC/Wells replied that it “did not have the NPV inputs because the latest denial related to a non-HAMP modification.” The Court Attorney Referee adjourned the settlement conference until July 19, 2010, to await the results of ASC/Wells’s review of Sarmiento’s HAMP application.

At the settlement conference held on July 19, 2010, ASC/Wells reported that it had not completed its HAMP review. Moreover, consistent with the statement of the HAMP support [*4]center dated June 8, 2010, counsel for ASC/Wells reported that ASC/Wells had previously denied Sarmiento’s HAMP application because of “excess resources.” The Court Attorney Referee stated that, “[i]n light of the repeated delays, the baseless denials, and obvious mishandling of the loan file by both ASC/Wells and [counsel for ASC/Wells] before a HAMP review was even done, I directed an ASC/Wells representative with personal knowledge and settlement authority to appear in person at the next settlement conference.”

At the next settlement conference, which was held on September 14, 2010, Eliza Melendez of ASC/Wells appeared, and explained that “Sarmiento’s HAMP application was still under review and that a new BPO was required to value the [property] for the NPV test.” The Court Attorney Referee described Melendez as having limited knowledge of Sarmiento’s file, and no settlement authority. Sarmiento’s counsel asserted that ASC/Wells should waive at least nine months of accrued interest because of the “inexplicable delays” in ASC/Wells’s HAMP review. The Court Attorney Referee directed the vice president of ASC/Wells to personally appear at the next settlement conference.

The next settlement conference was held on September 28, 2010. At that time, Tracy Brooks, a Loan Administration Manager in the Home Preservation Department of ASC/Wells, personally appeared, and she reported that the HAMP review was incomplete because Sarmiento had not submitted certain documents. However, when Brooks accessed Sarmiento’s loan file on her personal laptop computer, she confirmed that the file was complete. Upon Brooks’s request, she was allowed to review the file overnight. The next day, Brooks reported that ASC/Wells needed a property tax bill and a copy of Sarmiento’s property insurance declaration page, and that she was expediting the HAMP review.

At the next settlement conference, which was held on October 5, 2010, ASC/Wells offered a traditional, non-HAMP loan modification, in which the annual percentage rate (hereinafter APR) was lowered from 8.25% to 4%. ASC/Wells explained that it “had not made a HAMP offer because it was still trying to figure out what to do’ about the informal escrow account that . . . Sarmiento had set aside at [the Court Attorney Referee’s] direction.”

Fourth HAMP Denial

Meanwhile, according to the Court Attorney Referee, “ASC/Wells sent . . . Sarmiento a denial letter [dated October 6, 2010], erroneously and preposterously stating that he was denied a HAMP modification because he was current on his mortgage loan and not at risk of default.

At a settlement conference held on October 12, 2010, ASC/Wells “reported for the first time that an NPV test had been run and that [Sarmiento] had failed,” meaning that a HAMP modification would not be more favorable to the plaintiff than a foreclosure sale. ASC/Wells provided none of the data or inputs it had used to conduct the NPV test, and reiterated its offer of a traditional, non-HAMP loan modification. Sarmiento rejected the non-HAMP loan modification as unaffordable.

A few weeks later, in an email message dated November 2, 2010, ASC/Wells provided some of the data and inputs it had used to conduct the NPV test. According to the Court Attorney Referee, this data showed that ASC/Wells conducted the NPV test in November 2010, which was 25 months after Sarmiento defaulted, and one year after ASC/Wells had initially denied Sarmiento’s HAMP application. The Court Attorney Referee calculated that, as a result of ASC/Wells’s delay, more than $40,000 in arrears accrued on the loan.

On November 5, 2010, ASC/Wells offered Sarmiento a second traditional, non-HAMP modification, in which the APR was initially dropped to 2%, but then increased to 4%. Sarmiento rejected that offer.

At a settlement conference held on January 14, 2011, ASC/Wells stated that it would make no further modification offers. ASC/Wells then retained Hogan Lovells, LLP (hereinafter Hogan) as cocounsel to Steven J. Baum, P.C., in anticipation of a hearing pursuant to CPLR 3408 before the Supreme Court to determine whether it had failed to negotiate in good faith. According to the Court Attorney Referee, at that conference, Hogan acknowledged that ASC/Wells had handled Sarmiento’s loan “poorly,” but stated that ASC/Wells could not “do anything for . . . Sarmiento because of excessive forbearance.”

No progress on a settlement was made in three subsequent settlement conferences. With the parties at an impasse, the Court Attorney Referee directed them to submit position statements for use in the preparation of the report. In her report, the Court Attorney Referee determined that the plaintiff and ACS/Wells had failed to negotiate a loan modification in good faith, [*5]and had not complied with HAMP guidelines. Thus, the Court Attorney Referee recommended, inter alia, that the Supreme Court conduct a hearing to determine whether sanctions should be imposed against the plaintiff and ASC/Wells and its counsel.

Sarmiento’s Motion for an Award of Sanctions

By notice of motion dated June 17, 2011, Sarmiento moved to bar the plaintiff from collecting interest or fees accrued on the subject loan from December 1, 2009, “to date,” to bar the plaintiff from collecting from him any attorney’s fee or costs incurred “to date” in this action, and to direct the plaintiff to review the subject loan for a HAMP modification using an unpaid principal balance that excluded interest, fees, and costs that had accrued from December 1, 2009, “to date.” In support of his motion, Sarmiento submitted, inter alia, his counsel’s affirmation, to which were appended, as exhibits, an affidavit from Sarmiento, excerpts from a handbook entitled “Making Home Affordable Handbook for Servicers of Non-GSE Mortgages,” letters and copies of email messages between ASC/Wells and Sarmiento that were sent during 2010, and a proposed order. In an affirmation, Sarmiento’s counsel argued that the conduct of ASC/Wells demonstrated an “egregious refusal to negotiate in good faith, including its repeated delays and baseless denials of Mr. Sarmiento’s request for a modification in violation of HAMP guidelines.”

The Plaintiff’s Opposition

In opposition to Sarmiento’s motion, the plaintiff submitted, inter alia, an affidavit from Kyle N. Campbell, Vice President of Loan Documentation for ASC/Wells.

Campbell averred as follows: on February 18, 2010, the plaintiff received all documents necessary to review Sarmiento’s HAMP application. By letter dated April 2, 2010, the application was denied because Sarmiento’s debt-to-income ratio exceeded HAMP limits, inasmuch as his monthly expenses were $7,823.64 and his monthly income was only $4,728.94. After receiving additional financial documents in late April 2010, the plaintiff again reviewed the loan file but, by letter dated May 13, 2010, Sarmiento’s HAMP application was again denied, as was the possibility of a traditional, non-HAMP loan modification, because his debt-to-income ratio remained excessive, specifically, he had monthly income of $3,839.91, and monthly expenses of $7,253.22.

In September 2010, the plaintiff offered Sarmiento a non-HAMP loan modification, lowering the APR of the loan from 8.25% to 4%. Sarmiento rejected that offer, as it was not made pursuant to HAMP. In response, the plaintiff made a second non-HAMP loan modification offer, in which the APR of the loan would be initially lowered to 2% and gradually increased to 4%. Sarmiento also rejected that offer. Campbell asserted that the plaintiff could not offer any further modifications because of Sarmiento’s “limited income and his delinquency in making any payments under the loan for more than two years.”

On August 2, 2011, the parties stipulated, among other things, that Sarmiento’s motion seeking, inter alia, to bar the plaintiff from collecting interest or fees that accrued on the subject loan since December 1, 2009, would be decided without an evidentiary hearing.

The Order Appealed From

Based upon the papers submitted, the Supreme Court, in the order appealed from, inter alia, granted Sarmiento’s motion to bar the plaintiff from collecting interest or fees that accrued on the subject loan since December 1, 2009, to bar the plaintiff from recovering any costs or attorneys’ fees it incurred in this action, and to direct the plaintiff to review the subject loan for a HAMP loan modification using correct information and without regard to interest or fees that have accrued on the subject loan since December 1, 2009. The Supreme Court determined that, while the plaintiff had failed to negotiate in good faith as required by CPLR 3408(f), Sarmiento had acted in good faith. The court determined that, while Sarmiento and his counsel acted quickly and had been in contact with the plaintiff and ASC/Wells, the plaintiff and ASC/Wells has failed to respond to Sarmiento’s “requests for very basic information” related to his HAMP application, and their counsel’s communications with Sarmiento had sown confusion, distress, and doubt by including, among other things, confusing and vague rejection notices and requests for duplicative documents. The court stated:

“To describe the Plaintiff’s attitude succinctly: it was happy to do equity when it brought the underlying action for foreclosure, but stubbornly refused to do equity when as a result of statute (CPLR 3408), it was forced to sit down at the negotiating table with the homeowner and attempt to work out a deal. Put otherwise, the only delay’ that is legal in a foreclosure action is the delay imposed by [*6]CPLR 3408, and good faith means participating honestly, cleanly, and mutually in that delay’ process. Otherwise, this Court may exercise its equitable powers to restrict any remedy otherwise available.”

The plaintiff appeals.


The federal response to the mortgage foreclosure crisis included the creation of HAMP, which arose as part of the Emergency Economic Stabilization Act of 2008 (12 USC §§ 5201 et seq.) and the Helping Families Save Their Homes Act of 2009 (Pub L 111-22, § 1[a], 123 Stat 1632, 1632 [111th Cong, 1st Sess, May 20, 2009]) (see JP Morgan Chase Bank, N.A. v Ilardo, 36 Misc 3d 359, 366 [Sup Ct, Suffolk County]). HAMP is administered by the Federal National Mortgage Association (hereinafter Fannie Mae), as an agent of the United States Treasury Department (see id. at 366). The purpose of HAMP “is to provide relief to borrowers who have defaulted on their mortgage payments or who are likely to default by reducing mortgage payments to sustainable reduced levels, without discharging any of the underlying debt” (id.).

Fannie Mae entered into agreements with numerous home loan servicers, including Wells Fargo, pursuant to which the servicers “agreed to identify homeowners who were in default or would likely soon be in default on their mortgage payments, and to modify the loans of those eligible under the program” (Wigod v Wells Fargo Bank, N.A., 673 F3d 547, 556 [7th Cir]). HAMP provides lenders and loan servicers an incentive “to offer loan modifications to eligible homeowners” (Young v Wells Fargo Bank, N.A., 717 F3d 224, 228 [1st Cir]; see Edwards v Aurora Loan Servs., LLC, 791 F Supp 2d 144, 148 [D DC] [explaining that, under HAMP, the United States Treasury Department “pay(s) financial incentives to servicers and loan owners/investors that are sufficient to make a HAMP modification a better financial outcome than foreclosure for the servicer and investor”]).

When a borrower applies for a HAMP loan modification, the first step is to determine HAMP eligibility, which includes, among other things, consideration of whether the subject loan originated prior to January 1, 2009, the subject property is improved by a one-to-four-family house, the borrower resides in the house, and, prior to modification, the borrower’s monthly mortgage payment exceeded 31% of the borrower’s verified gross monthly income (see Making Home Affordable Handbook for Servicers of Non-GSE Mortgages vers 3.2, ch 2, § 1.1 [HAMP Eligibility Criteria]). If the initial HAMP eligibility criteria are met, upon the borrower’s submission to the servicer of the required financial information, the servicer must apply a “waterfall,” i.e., a multiple-step process that is to be applied in a particular sequence, one step at a time, which here involves a five-step review of the terms of the loan to determine whether modification of one or more of those terms might reduce the monthly mortgage payment to no more than 31% of the borrower’s gross monthly income. The five steps of the standard waterfall, in the order in which they are to be applied, are capitalization modification, interest rate reduction, term extension, principal forbearance, and principal forgiveness (see Making Home Affordable Handbook for Servicers of Non-GSE Mortgages vers 3.2, ch 2, § 6.3 [Standard Modification Waterfall]; see also Edwards v Aurora Loan Servs., LLC, 791 F Supp 2d at 149). Deviations from the standard waterfall are not precluded and, under certain circumstances, servicers may offer borrowers modifications more favorable than those required under HAMP (see Making Home Affordable Handbook for Servicers of Non-GSE Mortgages vers 3.2, ch 2, § 6.3.6 [Variation from Standard Modification Waterfall]).

Moreover, “[a]ll loans that meet HAMP eligibility criteria and are either deemed to be in imminent default or delinquent as to two or more payments must be evaluated using a standardized NPV test that compares the NPV result for a modification to the NPV result for no modification” (Making Home Affordable Handbook for Servicers of Non-GSE Mortgages vers 3.2, ch 2, § 7]; see Edwards v Aurora Loan Servs., LLC, 791 F Supp 2d at 149 [citations omitted]). Using the standard modification waterfall, if the NPV test result under the modification scenario is greater than the NPV test result without modification, the result is deemed “positive” and the servicer “must offer the [HAMP] modification” (Making Home Affordable Handbook for Servicers of Non-GSE Mortgages vers 3.2, ch 2, § 7]). If the opposite occurs, the result is deemed “negative,” and the servicer, with the express permission of the investor, has the discretion to offer the HAMP modification (id.). If, after a negative result, the servicer opts not to offer the borrower a modification, it “must send a Non-Approval Notice and consider the borrower for other foreclosure [*7]prevention options” (id.).

CPLR 3408(f) and Good Faith

We now turn from the federal response to the financial crisis, and address New York’s response to the 2008 mortgage crisis. New York’s response included the enactment of CPLR 3408, a remedial statute which required that, “in residential foreclosure actions involving the type of loans within the ambit of that section, in which the defendant was a resident of the subject property, the court would hold a mandatory conference for settlement discussions” (Wells Fargo Bank, N.A. v Meyers, 108 AD3d 9, 17; see L 2008, ch 472; CPLR 3408).

In 2009, CPLR 3408 was amended by, among other things, requiring mandatory settlement conferences in mortgage foreclosure actions involving any home loan in which the defendant is a resident of the subject property—regardless of when the home loan was made—and requiring both the plaintiff and defendant to negotiate in “good faith” to reach a resolution of the action, including, if possible, a loan modification (L 2009, ch 507, § 9, amending CPLR 3408[a] and adding CPLR 3408[f]). The Chief Administrator of the Courts thereafter promulgated 22 NYCRR 202.12-a, a regulation setting forth the rules and procedures governing CPLR 3408 settlement conferences (see 22 NYCRR 202.12-a [directing the court to “ensure that each party fulfills its obligation to negotiate in good faith”]). “The purpose of the good faith requirement [in CPLR 3408] is to ensure that both plaintiff and defendant are prepared to participate in a meaningful effort at the settlement conference to reach resolution” (2009 Mem of Governor’s Program Bill, Bill Jacket, L 2009, ch 507, at 11). While the aspirational goal of negotiations pursuant to CPLR 3408 is that the parties “reach a mutually agreeable resolution to help the defendant avoid losing his or her home” (CPLR 3408[a]), the statute requires only that the parties enter into and conduct negotiations in good faith (see Wells Fargo Bank, N.A. v Van Dyke, 101 AD3d 638). In its present form, CPLR 3408 provides, in pertinent part, as follows:

“(a) In any residential foreclosure action involving a home loan . . . in which the defendant is a resident of the property subject to foreclosure, the court shall hold a mandatory conference . . . for the purpose of holding settlement discussions pertaining to the relative rights and obligations of the parties under the mortgage loan documents, including, but not limited to determining whether the parties can reach a mutually agreeable resolution to help the defendant avoid losing his or her home, and evaluating the potential for a resolution in which payment schedules or amounts may be modified or other workout options may be agreed to, and for whatever other purposes the court deems appropriate.

“(f) Both the plaintiff and defendant shall negotiate in good faith to reach a mutually agreeable resolution, including a loan modification, if possible” (CPLR 3408[a], [f] [emphasis added]).

A review of the legislative history does not reveal any discussion of the “good faith” standard envisioned by the Legislature (see L 2009, ch 507).

On this appeal, the plaintiff essentially argues that a party to a mortgage foreclosure action can only be found to have violated the good-faith requirement of CPLR 3408(f) when that party has engaged in egregious conduct such as would be necessary to support a finding of “bad faith” under the common-law. The plaintiff maintains that it did not engage in any egregious conduct such as gross negligence or intentional misconduct and, therefore, it satisfied the good-faith requirement of CPLR 3408(f).

In the absence of a statutory definition of “good faith,” we must first determine whether a lack of good faith should be measured by the common-law standard of bad faith or by a plaintiff’s failure to comply with HAMP guidelines. No published decision appears to specifically define “good faith,” as that term is employed in CPLR 3408(f). In Wells Fargo Bank, N.A. v Van Dyke (101 AD3d at 638-639), the Appellate Division, First Department, rejected a plaintiff mortgagee’s argument that compliance with the good faith requirement of CPLR 3408 is established “merely by proving the absence of fraud or malice on the part of the lender,” and briefly addressed the issue of what constitutes “good faith” by noting that “[a]ny determination of good faith must be [*8]based on the totality of the circumstances” taking into account that CPLR 3408 is a remedial statute. However, the standard to apply in determining what constitutes a lack of good faith pursuant to CPLR 3408(f) is a matter of first impression in this Court (cf. IndyMac Bank, F.S.B. v Yano-Horoski, 78 AD3d 895, 896 [the plaintiff did not challenge “bad faith” determination on appeal, but only contested the sanction of cancellation of the debt]).

A review of various trial-level court decisions shows that courts have not required a showing of intentional misconduct, malice, or gross negligence when determining whether a party has failed to negotiate in good faith as required by CPLR 3408(f). For example, one court observed that good faith is a subjective concept, generally meaning honest, fair, and open dealings, and a “state of mind motivated by proper motive” (HSBC Bank USA v McKenna, 37 Misc 3d 885, 905 [Sup Ct, Kings County] [internal quotation marks omitted]). Unreasonable, arbitrary, or unconscionable conduct is inconsistent with the statutory purpose of good faith negotiations aimed at achieving a resolution (see id. at 908). Several trial-level courts have found that, where a plaintiff lost financial documents, sent confusing and contradictory communications, inexcusably delayed a modification decision, or denied requests for HAMP loan modifications without setting forth grounds, such conduct constituted a lack of good faith within the meaning of CPLR 3408(f) (see e.g. Wells Fargo Bank, N.A. v Ruggiero, 39 Misc 3d 1233[A], 2013 NY Slip Op 50871[U] [Sup Ct, Kings County] [finding it appropriate to sanction the plaintiff for its failure to act in good faith where the plaintiff, inter alia, provided conflicting information, refused to honor agreements, engaged in unexcused delay, imposed unexplained charges, made misrepresentations, and failed to deal honestly, fairly, and openly]; HSBC Bank USA v McKenna, 37 Misc 3d at 888, 898-899, 910 [accepting a referee’s recommendation that the plaintiff be found to have failed to act in good faith where the plaintiff rejected a proposed short sale at a sum the plaintiff had previously stated was its minimum sale amount and, in dicta, advising that, in determining whether the plaintiff failed to act in good faith in rejecting a short sale proposal, the factors to be considered included the outstanding debt, the likely market movement, and whether a short sale would result in a greater yield than a public foreclosure auction]; cf. Wells Fargo Bank, N.A. v Van Dyke, 101 AD3d 638 [the defendants did not establish lack of good faith by the plaintiff where the defendants did not submit evidence supporting their claimed rental income]; but see JP Morgan Chase Bank, N.A. v Ilardo, 36 Misc 3d at 366, 378-380 [the plaintiff’s conduct did not constitute a lack of good faith because an interim modification plan applied on a trial basis did not contractually obligate the plaintiff to provide a permanent HAMP loan modification to the defendants]). In addition, while we were not expressly called upon to decide the proper standard to apply in Wells Fargo Bank, N.A. v Myers (108 AD3d 9), in that case we determined that the record supported the Supreme Court’s finding that the mortgagee had failed to satisfy its obligation to negotiate in good faith without applying the common-law standard of bad faith.

The plaintiff nevertheless urges this Court to adopt the common-law standard of bad faith and hold that in determining whether a party failed to act in good faith during mandatory settlement negotiations pursuant to CPLR 3408, a court should consider only whether the party acted deliberately or recklessly in a manner that evinced gross disregard of, or conscious or knowing indifference to, another’s rights. This standard for bad faith conduct has been articulated in various contexts to determine issues such as whether an insurance carrier may be held liable for the alleged bad-faith failure to accept a settlement offer (see Pavia v State Farm Mut. Auto. Ins. Co., 82 NY2d 445, 453-454 [to establish a prima facie case of bad faith, the plaintiff must establish that the insurer’s conduct constituted a “gross disregard of the insured’s interests—that is, a deliberate or reckless failure to place on equal footing the interests of its insureds with its own interests when considering a settlement offer”]); whether a “no-damage-for delay” clause in a contract may be enforced for delays allegedly actuated by bad faith (see Kalisch-Jarcho, Inc. v City of New York, 58 NY2d 377, 384-385 [“no-damage-for delay” clause will not exempt a party from liability for willful or gross negligence, intentional wrongdoing, fraudulent or malicious conduct]); and whether allegedly stolen bonds were taken in bad faith (see Manufacturers & Traders Trust Co. v Sapowitch, 296 NY 226, 229 [bad faith is “nothing less than guilty knowledge or willful ignorance”]).

Were this Court to adopt the plaintiff’s proposed standard for determining whether a party failed to act in good faith, we would undermine the remedial purpose of CPLR 3408. The purpose of the statute is “to address the problem of mortgage foreclosures” by “help[ing] struggling homeowners without harming all consumers by inadvertently driving up the cost of credit or limiting the availability of legitimate credit” (Letter of Sen Farley, Bill Jacket, L 2008, ch 472, at 5), and [*9]”providing additional protections and foreclosure prevention opportunities for homeowners at risk of losing their homes” (Senate Introducer’s Mem in Support, Bill Jacket, L 2008, ch 472, at 7). To reiterate, “[t]he purpose of the good faith requirement [in CPLR 3408] is to ensure that both plaintiff and defendant are prepared to participate in a meaningful effort at the settlement conference to reach resolution” (2009 Mem of Governor’s Program Bill, Bill Jacket, L 2009, ch 507, at 11).

Therefore, we hold that the issue of whether a party failed to negotiate in “good faith” within the meaning of CPLR 3408(f) should be determined by considering whether the totality of the circumstances demonstrates that the party’s conduct did not constitute a meaningful effort at reaching a resolution. We reject the plaintiff’s contention that, in order to establish a party’s lack of good faith pursuant to CPLR 3408(f), there must be a showing of gross disregard of, or conscious or knowing indifference to, another’s rights. Such a determination would permit a party to obfuscate, delay, and prevent CPLR 3408 settlement negotiations by acting negligently, but just short of deliberately, e.g., by carelessly providing misinformation and contradictory responses to inquiries, and by losing documentation. Our determination is consistent with the purpose of the statute, which provides that parties must negotiate in “good faith” in an effort to resolve the action, and that such resolution could include, “if possible,” a loan modification (CPLR 3408[f]; see Wells Fargo Bank, N.A. v Meyers, 108 AD3d at 11, 18, 20, 23; Wells Fargo Bank, N.A. v Van Dyke, 101 AD3d 638 [the defendants did not demonstrate that the plaintiff failed to act in good faith because nothing in CPLR 3408 requires a plaintiff to make the exact settlement offer desired by the defendants]; HSBC Bank USA v McKenna, 37 Misc 3d 885 [Sup Ct, Kings County] [the plaintiff failed to act in good faith based upon, inter alia, a referee’s finding that the plaintiff rejected an all-cash short sale offer]).

Where a plaintiff fails to expeditiously review submitted financial information, sends inconsistent and contradictory communications, and denies requests for a loan modification without adequate grounds, or, conversely, where a defendant fails to provide requested financial information or provides incomplete or misleading financial information, such conduct could constitute the failure to negotiate in good faith to reach a mutually agreeable resolution.

In this case, the totality of the circumstances supports the Supreme Court’s determination that the plaintiff failed to act in good faith, as the plaintiff thwarted any reasonable opportunities to settle the action, thus contravening the purpose and intent of CPLR 3408. Sarmiento submitted his initial HAMP application on October 29, 2009, and provided updated financial documentation on November 18, 2009. Beginning on December 1, 2009, at the direction of the Court Attorney Referee, Sarmiento began placing $2,000 per month in an escrow fund, in part to demonstrate his ability to make modified monthly payments. On January 2, 2010, six weeks after receiving Sarmiento’s complete HAMP application, the plaintiff denied the application on the erroneous ground that the property was not Sarmiento’s primary residence.

Another month passed without a proper HAMP determination. On February 2, 2010, the plaintiff indicated that it needed a BPO to conduct an NPV test, a representation which suggested that Sarmiento’s HAMP application had satisfied the five-step waterfall test. Nevertheless, two months later, on April 2, 2010, the plaintiff again denied Sarmiento’s HAMP application, apparently for failing to satisfy the waterfall test since the plaintiff claimed that modification could not result in a monthly payment equal to or less than 31% of Sarmiento’s gross monthly income. However, the plaintiff apparently reached this conclusion using incorrect income data.

At the request of the Court Attorney Referee, Sarmiento submitted a second HAMP application on April 26, 2010. On May 13, 2010, the plaintiff denied the application, this time on the ground that the property was “not affordable.” The plaintiff ignored Sarmiento’s ensuing request for a more specific reason for denial and for the data that the plaintiff had used in conducting the NPV test.

On June 8, 2010, after Sarmiento sought the assistance of the HAMP support center, he was told that his HAMP application had been denied because of the escrow fund he had created at the direction of the Court Attorney Referee. This rationale, presumably relayed to the HAMP support center by the plaintiff, was a new ground for denial, and was inexplicable since the plaintiff was aware that the escrow fund existed at the direction of the Court Attorney Referee.

Nevertheless, despite the apparent denial of May 13, 2010, the plaintiff indicated, on July 1, 2010, that it was still reviewing Sarmiento’s HAMP application. Despite having indicated in February 2010 that it would soon conduct an NPV test, the plaintiff stated that no NPV test had yet been conducted. On July 19, 2010, the plaintiff indicated that the defendant’s HAMP application had been denied because of the creation and existence of the escrow fund.

Two months later, the plaintiff indicated that it again needed a BPO so that it could conduct an NPV test. Notably, the plaintiff had made an identical representation eight months earlier, and did not explain why it had not conducted the NPV test in February 2010. On October 5, 2010, the plaintiff offered Sarmiento a non-HAMP loan modification, while simultaneously indicating that his HAMP application was still under review. On the following day, the plaintiff again denied Sarmiento’s HAMP application, this time on the ground that he was current on his mortgage. The record demonstrates that it was not until October 12, 2010, nearly one year after Sarmiento made his initial HAMP application, that the plaintiff finally conducted an NPV test, which was negative.

Any one of the plaintiff’s various delays and miscommunications, considered in isolation, does not rise to the level of a lack of good faith. Viewing the plaintiff’s conduct in totality, however, we conclude that its conduct evinces a disregard for the settlement negotiation process that delayed and prevented any possible resolution of the action and, among other consequences, substantially increased the balance owed by Sarmiento on the subject loan. Although the plaintiff may ultimately be correct that Sarmiento is not entitled to a HAMP modification, the plaintiff’s conduct during the settlement negotiation process makes it impossible to discern such a fact, as the plaintiff created an atmosphere of disorder and confusion that rendered it impossible for Sarmiento or the Supreme Court to rely upon the veracity of the grounds for the plaintiff’s repeated denials of Sarmiento’s HAMP application.

Therefore, the totality of the circumstances supports the Supreme Court’s determination that the plaintiff failed to negotiate in good faith, in violation of CPLR 3408(f) (see Wells Fargo Bank, N.A. v Meyers, 108 AD3d at 17).


The plaintiff further argues that, even if it failed to act in good faith, the Supreme Court lacked the authority to sanction it absent express statutory or regulatory authority. In the plaintiff’s view, CPLR 3408(f) and 22 NYCRR 202.12-a(c)(4) require the parties to negotiate in good faith, but provide no mechanism to enforce that requirement. In order to address this particular contention, we must first look to our recent holding in Wells Fargo Bank, N.A. v Meyers (108 AD3d 9).

In Meyers, the plaintiff in a foreclosure action had, among other things, commenced the action even though its loan modification proposal was pending, denied a permanent loan modification based on the defendants’ purported debt-to-income ratio without submitting evidence of its calculations, and provided conflicting information regarding its denials of requests for a loan modification. This Court observed that, upon finding that foreclosing plaintiffs failed to negotiate in good faith pursuant to CPLR 3408(f), the trial-level courts have imposed a variety of sanctions, including barring them from collecting interest, legal fees, and expenses, imposing exemplary damages against them, staying the proceedings, imposing a monetary sanction pursuant to 22 NYCRR part 130, and vacating the judgment of foreclosure and sale and cancelling the note and mortgage (see Wells Fargo Bank, N.A. v Meyers, 108 AD3d at 20-21). We noted that, save for our determination in IndyMac Bank, F.S.B. v Yano-Haroski (78 AD3d 895), in which we reversed the severe sanction of cancellation of the note and mortgage, based on the plaintiff’s failure to negotiate in good faith as required by CPLR 3408(f), this Court had not otherwise reviewed the propriety of other means of enforcing the good-faith negotiation requirement of CPLR 3408(f).

In Meyers, this Court determined that there was no basis to disturb the Supreme Court’s finding, made after a hearing, that the plaintiff failed to negotiate in good faith, in violation of CPLR 3408(f). While acknowledging that CPLR 3408(f) does not set forth a specific remedy for a party’s failure to negotiate in good faith (see Wells Fargo Bank, N.A. v Meyers, 108 AD3d at 19; Hon. Mark C. Dillon, The Newly-Enacted CPLR 3408 for Easing the Mortgage Foreclosure Crisis: Very Good Steps, but not Legislatively Perfect, 30 Pace L Rev 855, 875 [Spring 2010]), this Court found that the particular remedy imposed by the Supreme Court—compelling the plaintiff to permanently abide by the terms of a HAMP trial loan modification—was “unauthorized and inappropriate” (Wells Fargo Bank, N.A. v Meyers, 108 AD3d at 21). This Court did not rule on the possibility of other remedies for a violation of the good-faith negotiation requirement set forth in CPLR 3408(f) and cautioned that the courts may not rewrite the loan agreements into which the parties freely entered merely upon finding that one party failed to satisfy its obligation to negotiate in good faith pursuant to CPLR 3408(f) (see id.).

Contrary to the plaintiff’s contention, the Supreme Court did not lack authority to [*10]impose a sanction for the plaintiff’s failure to negotiate in good faith pursuant to CPLR 3408(f). This Court has specifically held that the Supreme Court has “authority to impose a sanction or remedy in the event it determined . . . that [a] plaintiff had failed to negotiate in good faith in the mandatory foreclosure settlement conferences” (Bank of Am. v Lucido, 114 AD3d 714, 715, citing Wells Fargo Bank, N.A. v Meyers, 108 AD3d at 11). Although CPLR 3408 is silent as to the sanctions or remedies that may be employed for violation of the good faith negotiation requirement, “[i]n the absence of a specifically authorized sanction or remedy in the statutory scheme, the courts must employ appropriate, permissible, and authorized remedies, tailored to the circumstances of each given case” (Wells Fargo Bank, N.A. v Meyers, 108 AD3d at 23).

Notably, unlike the borrower in Meyers (108 AD3d 9), Sarmiento specifically moved to impose the sanctions ultimately imposed by the Supreme Court, based upon the court’s finding that the plaintiff violated the good faith requirement of CPLR 3408(f). Therefore, the plaintiff was on notice that the Supreme Court would entertain such a remedy.

We also note that in contrast to Meyers, the plaintiff does not argue that the sanctions actually imposed in the instant case were excessive or improvident. Therefore, the propriety of the particular sanctions imposed herein is not before us. To the extent that the arguments raised in the plaintiff’s reply brief may be viewed as a challenge to the propriety of the sanction imposed by the Supreme Court in this case, these arguments are not properly before us since they are raised for the first time in a reply brief, to which Sarmiento had no opportunity to respond (see Monadnock Constr., Inc. v DiFama Concrete, Inc., 70 AD3d 906; Congel v Malfitano, 61 AD3d 809; Borbeck v Hercules Constr. Corp., 48 AD3d 498).

We are cognizant that, in a foreclosure action, “[t]he court’s role is limited to interpretation and enforcement of the terms agreed to by the parties, and the court may not rewrite the contract or impose additional terms which the parties failed to insert” (131 Heartland Blvd. Corp. v C.J. Jon Corp., 82 AD3d 1188, 1189; see Wells Fargo Bank, N.A. v Meyers, 108 AD3d 9; Maser Consulting, P.A. v Viola Park Realty, LLC, 91 AD3d 836, 837). Thus, in fashioning a remedy for a violation of the good-faith negotiation requirement set forth in CPLR 3408(f), courts should be mindful not to rewrite the contract at issue or impose contractual terms which were not agreed to by the parties. As the nature of the sanction in this case is unchallenged, our determination herein should not be construed as a deviation from the above-stated principle.

Accordingly, the order is affirmed insofar as appealed from.

RIVERA, J.P., SKELOS and LOTT, JJ., concur.

ORDERED that the order is affirmed insofar as appealed from, with costs.


Aprilanne Agostino

Clerk of the Court


Footnote 1:. ACS/Wells was represented by the law firm of Steven J. Baum, P.C.

Footnote 2:. HAMP is a federal program that is intended to help homeowners avoid foreclosure “by modifying loans to a level that is affordable for borrowers now and sustainable over the long term” (, last accessed July 16, 2014).

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Stonewalled Foreclosure Conferences: Do Homeowners Have a Remedy at Hand?


In 2008-09, with home foreclosures skyrocketing in the wake of the economic meltdown[1], New York led the nation in developing measures to aid struggling homeowners. The state legislature enacted a law requiring that banks negotiate in “good faith” with homeowners at a mandatory court-supervised settlement conference within in sixty days of suing for foreclosure. The new law instructed the court system to issue rules granting the state’s judges “the necessary power and authority … to “ensur [e]” both side negotiate in good faith and that settlement conferences “not be unduly delayed or subject to willful dilatory tactics.”

Despite that sweeping authority, the good-faith law is silent on the question of remedy, and for the last five years, the requirement that banks negotiate in “good faith” with New York homeowners has been an obligation in search of a remedy. In a handful of rulings, the state’s appeals courts have only told the judges and referees responsible for supervising the settlement process what they could not do to compel banks to act in good faith.

With one exception, all of the appellate rulings have come out the Appellate Division, Second Department in Brooklyn, which hears appeals from the four counties with the highest number of pending foreclosures in the state: Nassau, Suffolk, Brooklyn and Queens. The sole other ruling was from the First Department, which sits in Manhattan.

Those rulings have rejected judges’ use of compulsory orders and punishing fines to force banks to reach a reasonable accommodation with homeowners or even to require them to make good on their offers to lower payment terms. Meanwhile, no appellate court has put its imprimatur on the most promising remedy that has been adopted by trial judges: the forfeiture of interest and other lender costs, including attorneys fees, which have mounted during delays caused by the absence of good-faith negotiations.

But, the issue is now coming to a head. At least two cases are pending—one in the First Department and one in the Second—squarely presenting the question of whether forfeiture, commonly referred to by lawyers as “tolling”)  is a viable remedy.

In the interim, the law books have become littered with cases, in which trial judges and referees have found that banks have failed to negotiate in good faith. Numerous opinions cite delays of up to two years and as many as 17 adjournments.

The causes have been manifold: banks had no representative present with authority to negotiate despite a clear statutory mandate to do so; bank representatives were unfamiliar with the cases and did not have critical documents related to homeowners’ loans; banks had backtracked on modification agreements even though homeowners had paid the lower amount for the three months required in many instances by federal guidelines—and often for many months more; and banks, only belatedly after months of negotiations, have advised homeowners and the courts that they were barred from negotiating any payment relief in situations where a mortgage has become part of a pool aggregated by an investment syndicate.


Two Pending Appeals

Both of the cases on appeal present those issues, which over and over again, have formed the basis of trial court rulings, finding the banks had not negotiated in good faith.

In the case pending in the Second Department [U.S. Bank National Association v. Green, 9220/09 (Kings County)], Brooklyn Justice Donald Scott Kurtz ordered the tolling of interest and related charges, confirming a referee’s finding that the mortgage holder, after ten months of back and forth, had denied the homeowner a modification even though the owner had successfully paid the lower amounts for three months.

At about the same time the holder, an investment syndicate, raised a new issue: it was forbidden from making any loan modification by the agreement it used to sell mortgage-backed securities.

To speed a resolution, the referee, who oversaw the settlement discussions, ordered syndicate officials, with personal knowledge of the pooling agreement, to attend the conference and produce associated documents. Nonetheless, the settlement process dragged on without resolution for another 19 months (bringing the total delay to more than two years) before the referee recommended to Kurtz that the syndicate be compelled to reinstate the 2010 trial modification. Kurtz in March 2013 ordered tolling but rejected the recommendation that the syndicate be ordered to re-activate its modification.

The case pending in the First Department also presents, in stark form, the same recurring problems that have hindered the settlement process.

As was the case in Green, the settlement process in Citibank v. Barclay (Bronx County) dragged on for 11 months without resolution,. During that time, the homeowner attended nine conference sessions, submitted six original applications for a loan modification and was on numerous occasions asked to submit additional documentation even though that information had previously been supplied. Also, similar to Green, the homeowner in Barclay had been engaged in the settlement process for nearly a year before being informed by Citibank that investor restrictions precluded it from modifying the mortgage.

Bronx Justice Robert E. Torres, the trial judge in Barclay, made specific findings related to several of those points. With regard to authority and knowledge, he noted that the bank’s loan adjuster had testified before the referee that she had personal authority to modify mortgages and that she had been personally involved with the homeowner’s loan modification for three years. But on cross-examination, he noted, she admitted that she was assigned to Barclay’s loan file shortly before the hearing and that she had been asked by the bank to “come in and …do a more in-depth detailed investigation of files.”

Torres also wrote that the bank’s “bit by bit requests at each conference only serve to unnecessarily delay the modification application process while racking up interest, fees and penalties to the [Bank’s] benefit and [Barclay’s] detriment.”


AG Office Cites Wells Fargo Violations

Lest there be any doubt about the extent of those problems, the New York State Attorney General’s Office has developed evidence that Wells Fargo Bank has committed close to 200 violations of standards developed to speed loan modifications. The standards are contained in a $25 billion settlement reached in 2010 between the nation’s attorneys general and five major banks, including Wells Fargo. The evidence, which consists of sworn declarations by advocates, together with supporting documentation, in cases involving 97 New York homeowners, has been offered by the state Attorney General’s Office in litigation seeking to force Wells Fargo to live up to the 2010 settlement, U.S.A. v. Bank of America, 12-cv-361 (District of Columbia). Read the Attorney General’s brief. The case has been briefed, and a decision is being awaited from U.S. Judge Rosemary M. Collyer.

Similarly, a report prepared by three legal services groups found a widespread failure of banks to have a representative with settlement authority and knowledge of the homeowner’s case present at settlement conferences. The three groups—JASA/Legal Services for the Elderly in Queens, Legal Services NYC and MFY Legal Services—sent observers to 252 settlement conferences conducted in the fall of 2013. The observers reported that in 80 percent of the cases the banks failed to have present representatives with the settlement authority and knowledge required by New York law. In 36 percent of the observed cases, no bank representative was present with the authority to settle as required by CPLR 3408(c) and in 44 percent of the cases the representative lacked sufficient information to permit a conference to proceed.

         Briefing in the Barclay case is nearly complete and is underway in Green. The two arguments have taken on outsized importance. Two months after Kurtz embraced tolling, but rejected mandating reinstatement of a withdrawn modification offer, the Second Department nixed specific performance in Wells Fargo Bank v. Meyers, 108 A.D3d. 9 (May, 2013). In Meyers, however, Justice Thomas A. Dickerson, who wrote for a unanimous panel, underscored the need for guidance from either the legislature or the court system as to what type of remedies should be imposed for violations of the good-faith requirement.

Further, earlier this year, a push by homeowners’ advocates for legislation spelling out remedies fell to the wayside as legislators limited their efforts to extending the mandate for settlement conferences  another five years to 2020.


Court System’s Unexercised Power

In Meyers, Dickerson pointedly drew attention to the court system’s failure to develop sanctions for “egregious behavior” by the banks or their counsel despite having been specifically authorized by the legislature to do so.

Dickerson quoted from a provision in legislation adopting the good-faith obligation which “expressly” provided that the rules to be promulgated by the Chief Administrator of the Courts to govern settlement conferences “may include granting additional authority [to the states’ judges] to sanction the egregious behavior of a counsel or party.” Read the statute.The court system’s authority to issue a specific sanction or remedy has not been exercised, he wrote.

Meyers, much like the two cases pending on appeal—Green and Barclay—presented issues of the recurring problems experienced by homeowners in the settlement process. In Meyers, the homeowner attended eight court appearances which stretched out over eight months; was offered a modification lowering his monthly mortgage payments by $700 and met those payments for at least seven months; and was advised by the bank—six months after it had proposed a modification—that investor restrictions precluded the changing of the loan’s terms.

Nonetheless, the Second Department rejected the use of specific performance (legal jargon for a compulsory order to reinstate a withdrawn modification) despite sympathetic facts. The homeowner was a New York City police officer, Paul Meyers, who had taken a second job and worked overtime to keep up with his mortgage payments. In 2009, Meyers fell behind in his payments when he lost his second job and the NYPD cut back on overtime. Further his wife, Michela, testified at a good-faith hearing before then-Suffolk Justice Patrick A. Sweeney that Wells Fargo employees told her that a modification could not be offered unless she and her husband defaulted on their payments; and they had followed that advice.

Sweeney, finding bad faith after conducting a three-day hearing, ordered Wells Fargo Bank to reinstate the September, 2009 modification offer and dismissed the foreclosure proceeding. But, the Second Department reversed, concluding that an offer of a trial modification is not a binding contract and to enforce it would violate the Contract Clause of the U.S. Constitution.

Some lawyers for homeowners, who have examined the trend of the Second Department’s post-Meyers decisions, have raised questions whether they will support a ruling upholding tolling as a viable remedy for good-faith violations. But, Karen Gargamelli, the lawyer with Common Cause NY who is handling the Barclay appeal in the First Department, called such an outcome “inconceivable.”


Recent Signs of Progress

Since Meyers was handed down, there have been some signs that progress has been made with respect to some of the problems that have bogged down the settlement process. First, the state Attorney General’s network, which consists  of 90 groups the office has funded to provide lay counseling and legal aid to homeowners, has helped one-third of the 28,000 clients it has worked with to obtain modifications or, at least, the possibility of a modification, according to Melissa Grace, a spokeswoman for the office.

Out of that universe, the Attorney General’s network represented 8,000 homeowners during the settlement process. No separate data was provided concerning the success of those clients in obtaining modifications. The network is funded with $60 million the Attorney General’s Office received from the 2010 nationwide settlement with five major banks.

Second, the court system in late June authorized administrative judges in Nassau, Suffolk and Brooklyn to receive direct referrals of cases from referees (bypassing the judge to whom the case has been assigned) to hear legal issues that they do not have the authority to resolve. Court sources suggest that since judges, but not referees, are empowered to order sanctions, that the change will speed rulings on disputes over whether banks are acting in good faith.[2] Read the memo.

Third, homeowner advocates report that Bank of America in April flew into New York about a dozen workout specialists, led by two bank vice presidents, who ended working on two days with close to 100 Nassau County homeowners facing foreclosure. Maria DeGennaro, an attorney with the Empire Justice Center who oversees the work of 13 homeowner advocacy groups on Long Island, stated that the Bank of America had taken initiative in asking the courts to set aside one day with all Bank of America cases on the conference calendar.

“The workout specialists provided something that is sorely missing in most conferences,” DeGennaro added, “real-time information about the status of modification requests, with the result that some cases were resolved on the spot.” The 13 Long Island-based groups are a part of the network of agencies funded by the New York State Attorney General’s Office to provide counseling and representation to homeowners struggling with their mortgages.

Unfortunately, there is little data available to assist the state’s appellate judges as they wrestle with the problem of shaping appropriate remedies when banks fail to act in good faith. The annual report issued by the court system provides little meaningful information other than the number of homeowners who are represented during the settlement process. According to the 2013 report, 54 percent of the families participating in settlement talks during that year had representation.

The Attorney General’s office has not yet compiled data on the number of homeowners who lost their homes during the settlement process, Ms. Grace said, because the conference process is dynamic and yields hundreds of possible outcomes.





[1] The number of foreclosures in 2009 jumped by nearly 80 percent for pre-meltdown levels to 47,664. In 2013, there were 33,773 foreclosure filings statewide.

[2] Memorandum written by First Deputy Administrative Judge Lawrence K. Marks, dated June 26, 2014. Trial Justice Martin Schulman will perform the “backup” function in Queens.























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Scheck Takes a Different Tack in Friedman Case

Barry Scheck, a founder of the Innocence Project who has written the “book” on how to conduct post-conviction investigations, in a surprise move yesterday, submitted an affirmation supporting Jesse Friedman motion for a full-blown fact hearing seeking to overturn his 1998 guilty plea to molesting young boys in his Great Neck home. Read the affirmation.

Scheck was one of four outside experts tapped by Nassau District Attorney Kathleen Rice to “guide” her office’s review of Friedman’s 1998 plea. Rice agreed to conduct a post-conviction review after a blistering opinion was issued by the U.S. Court of Appeals in Manhattan, which strongly suggested she had an ethical obligation to do so.

The Second Circuit’s opinion, in turn, drew heavily from material in a widely acclaimed documentary “Capturing the Friedman” which was nominated for an Oscar in 2003.

Friedman served 13 years in prison and upon his release in 2001 was classified as a top-level sexual offender.

Scheck’s affirmation comes, almost to the day, a year after Rice’s office completed its review, which found no basis for overturning his conviction, a finding that at the time was embraced by the four-member advisory panel. In a four-page statement released last June 25, the panel put its imprimatur on the District Attorney’s review, stating that the attorneys conducting the review “did an excellent job under difficult circumstances.” The advisory panel further wrote, “we have no doubt [if warranted by the facts] that the Review Team was prepared to recommend without reservation that Friedman’s conviction be overturned. But that is not how the facts played out for the review team.”

There is a stark difference between the content and tenor of the June 25, 2013 document, and the affirmation Scheck submitted this morning, in which he “urge[d] the court to accord Mr. Friedman a full evidentiary hearing on the merits of his claims.”

In breaking with the conclusion of the other three advisory panel members, Scheck states that it would be “desirable” to review, among other documents, materials not available to Advisory panel such as grand jury minutes, the original case file …”

In his affirmation, Scheck states that the panel was aware that those materials were never given to the defense. In fact, he states that “ordinarily, following best practices in a Conviction Integrity Review it is desirable to have substantial disclosure of the prosecution’s file, grand jury minutes and police reports to the defense.” Those views are also expressed in an article Scheck wrote for the Cardozo Law Review in 2010, entitled “Professional and Conviction Integrity Programs: Why We Need Them, Why They Work and Models for Creating Them.”

In fact, Friedman’s lawyer, Ronald Kuby, made repeated effort to get access to those materials from the District Attorney’s office during its three-year investigation into the validity of Friedman’s plea. Friedman’s team also pressed Scheck that, despite the “best practices,” the prosecution had not provided it with grand jury and police materials.

Scheck, through a spokesman, declined to comment. The District Attorney’s Office has taken the position that those documents are required to remain confidential because they contain the names of sex victims. Friedman’s lawyers contend that the victims’ names could be redacted.


DA Ordered to Turnover Documents

Two months after the DA’s office issued its 155-page report re-validating Friedman’s conviction, Nassau County Supreme Court Justice F. Dana Winslow granted Friedman’s motion and ordered the DA’s office to provide the defense with all records maintained by the Nassau County Police Department and the District Attorney’s office, including grand jury minutes. The District Attorney’s office has appealed Winslow’s order, which has been stayed until the Appellate Division, Second Department issues a ruling. The panel’s four-page report last June stressed that its “primary focus” was on “process issues.”

The report listed four-areas for its inquiry but there was no reference to the “best practice” of broadly sharing materials with the defense related to the investigation and the ensuing prosecution. In his Cardozo Law Review, Scheck pointed to the Dallas District Attorney’s Office as having the “most prominent and successful” Conviction Integrity Unit in the nation. The very first of that office’s “best practices,” listed by Scheck, was if “a plausible claim of innocence” is presented, the integrity unit should make “the prosecution’s entire file, including work product” available to lawyers asserting the innocence claim.

There can be little doubt that Rice tapped her advisory committee for its halo value. Scheck, in that regard, is the first among equals. He became a national figure for his work with the “dream team” in the O.J. Simpson case and as co-head of the Innocence Project, which he founded with Peter Neufeld in 1992. At the innocence project, mainly through the use of DNA evidence, Scheck has had an outsized role in elevating claims of actual innocence onto the nation’s legal agenda.

The three other members of the advisory panel are also prominent in their fields and bring extensive experience with the criminal-justice system to the task of post-conviction review: Mark F. Pomerantz, a partner at Paul, Weiss, Rifkind, Wharton & Garrison and former head of the Criminal Division of the U.S. Attorney’s Office in the Southern District of New York; Patrick J. Harnett who headed the police department in Hartford, Conn. after a 32-year career with the New York City Police Department; and Susan Herman, a professor at Pace Law School and former executive director for the National Center for Victims of Crime.

Scheck’s affidavit seeks to justify his belated concern for the integrity of Friedman’s conviction upon unspecified “very specific claims that there are a number of serious substantive errors in the Rice report.” Those claims were contained in Friedman’s motion in Nassau County Court for relief from his conviction. It is Friedman’s third application for post-conviction relief (one in federal court and the other also in Nassau County).

Friedman filed for post-conviction relief this morning without awaiting a determination as to whether he is entitled to the broad discovery that Winslow ordered he receive. Perhaps, his game plan will be to move to supplement his motion if the Second Department affirms Winslow. In any event, Scheck—by highlighting the need for a broad hearing at which grand jury and police department materials will be available to Friedman’s lawyers—is putting a spotlight on an issue pending before the Second Department. While that has no legal relevance to the issues before the appeals court, there can be little doubt that public perceptions are an important backdrop to the court’s deliberations.

Rice used the advisory panel to create a public perception that her office’s work was unimpeachable. With Scheck’s new affidavit in hand, is not Friedman’s team attempting to do the same thing?


The Lines Have Been Drawn

In its 2010 ruling, the Second Circuit found that the prosecution consisted of a toxic brew of aggressive interview tactics, a hostile judge, junk science and tabloid coverage that sent the Great Neck community into a “moral panic.”

Writing for the U.S. Court of Appeals for the Second Circuit, Judge Edward R. Korman found the evidence against Jesse Friedman “extraordinarily suspect,” giving rise to “serious issues as to [his] guilt” ( Friedman v. Rehal, 618 F.3d 142).

Director Andrew Jarecki, in the three years he spent making the film, compiled material in which detectives described how they pressed the alleged young victims to make statements and also acknowledged recruiting psychotherapists to treat them. Likewise, film highlighted material from a clandestinely recorded interview of a 13-year old who was told by a detective that unless he acknowledged that he had been molested there will be “a little monster inside you … which every now and then rears its ugly head.”

The District Attorney’s Office heatedly disputed the film’s portrayal of events in the case, complaining that in one instance unedited transcripts showed that Jarecki used “selectively edited and misleading film portrayals.” It also countered that the clandestinely recorded tape of the 13-year old’s interview is missing and that the only evidence is from notes taken by Friedman’s prior attorney notes taken when he viewed the video.

The DA’s report also stated that Jesse Friedman’s father, Arnold Friedman confessed to Jesse’s uncle (who was shown in the film as being very distressed with Friedmans treatment), that both father and son had been involved in the abuse.

Arnold Friedman, who conducted afterschool computer classes in the family’s Great Neck Home, had pleaded guilty to molestation charges and committed suicide while in prison. Jesse Friedman, who was 19 at the time he pleaded guilty, assisted his father in conducting the classes




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Budget Cuts Taking Toll on Court Workers

As this year’s state budget negotiations come to a climax, the court system is dealing with an increasingly restive workforce. The rising tensions were evident when more than 100 court clerks at 60 Centre Street rallied at a meeting last week to support one of their own, who had refused to open a judge’s courtroom because no court officer was present.

Tensions among court clerks and other court employees have been rising since budgetary restrictions first forced the Office of Court Administration to start reducing staff with an early retirement incentive program in 2010. With its members straining to do more work with less people, the New York Court Clerks Association filed suit last December seeking overtime pay for its thinned ranks.

The early retirement program was followed in 2011 with forced layoffs after Governor Andrew Cuomo and the state Legislature cut the court system’s budget request by $170 million. As a result, Supreme Court citywide has 263 fewer clerks today than it had at the end of 2010, a decline of 15 percent. Throughout the state, the courts have lost 1,900 employees.

“My members are outraged that for the last three years they have struggled with increased workloads caused by staff shortages,” said Joe Walsh, the president of the court clerks association. “Now that the situation has crystallized into a public safety issue it has reached a flashpoint. “

The Supreme Court is similarly struggling with fewer court officers. At the time of the incident last week in Justice Anil Singh’s courtroom, three other courtrooms at 60 Centre Street had no court officers assigned to them, according to Patrick Cullen, the president of the 1,350-member New York Supreme Court Officers Association.

Cullen said that since 2010, attrition has resulted in the loss of 150 court officers in Supreme Courts in New York City and the mid-Hudson Valley. The problem of having not enough court officers to cover courtrooms has been “pervasive” over the last few years, he added.

A crisis in Justice Singh’s courtroom was averted when the clerk, who had refused to open his courtroom, relented after an administrative judge intervened, according to the New York Post.

Even so, anger continues to boil beneath the surface as illustrated by the clerks union’s lawsuit in New York Court Clerks Association v. Unified Court System of the State of New York, 13-7691. In its complaint, which has been assigned to Southern District Judge Robert W. Sweet, the union analyzed information contained in court system computers to show that clerks often work extra hours during the week and over weekends to keep up with an increasing flow of cases, according to the complaint.

One clerk alone has worked 133 extra hours without any compensation, according to that analysis. The union’s examination of work performed by 22 clerks revealed that 18 of them had worked extra hours without any compensation, let alone time-and-a-half overtime pay as required by the Fair Labor Standards Act.

That information was culled from OCA’s Universal Case Management System, which contains a time stamp for every piece of work a clerk enters into the system, explained Walsh, the clerk union president. OCA voluntarily extracted the data for the 22 employees at the union’s request but then balked at providing more information, Walsh said.

As sympathetic as the clerks’ plight seems, the union faces substantial factual and procedural hurdles in its lawsuit. OCA contends that any extra hours worked by the clerks were done as volunteers, and the clerks are not entitled to overtime unless they first receive permission to work extra time from their supervisors. Also, the union, faced with adverse rulings prohibiting federal courts from awarding monetary damages against states, has dropped its claims for monetary damages and injunctive relief, and is only seeking a prospective declaratory judgment.

The union described OCA’s position in its complaint as a subterfuge, claiming that the court system had “created a climate where clerks felt compelled to work past normal hours in order to finish their work, and court managers, under pressure to have the work done, allowed it to happen.”

Whether any relief for the staff shortages is on the horizon hinges on the outcome of budget negotiations in Albany. The court system’s budget request for the state fiscal year starting on April 1 calls for a $44.2 million budget increase to $1.81 billion. That 2.5 percent increase is necessary to put the courts on the “road to recovery” Chief Administrative Judge A. Gail Prudenti told a joint Senate-Assembly budget hearing in February, according to the New York Law Journal.

Governor Andrew Cuomo has criticized the court system’s budget request, saying it should be limited to 2 percent. The shaving of .5 percent off the courts’ request would cost the court system $9 million, which could hamper it in achieving on the “road-to-recovery” goals: the ending of a hiring freeze which has, with only very limited exceptions, prevented the court system from replacing any workers who depart.




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How Racist Image Led to Ouster of A Top Official in NY County Clerk’s Office

Last summer Justice Milton A. Tingling brought two photographs of shockingly racist and misogynistic images to the attention of the administrative judge in charge of the Supreme Court at 60 Centre St. in Manhattan.

In his cellphone, Tingling had a photograph of an illustration from a children’s book, which contained an illustration of an ape and a bird. Scrawled across the illustration were the phrases: “Nigger be like” and “I love me a bitch bird.” A second photograph captured an illustration of an ape-like figure using similarly vulgar language.

The images had been hanging on a wall of the New York County Clerk’s records room in the basement of the 60 Centre Street courthouse. The wall is about 30 feet directly behind the counter where the public goes to requisition case files. Three sources reported the images and inscription; one of them read to me what had been written on the two illustrations. Also, just this week, the union that represents the workers in the records room reported in its March newsletter that “a few workers” at 60 Centre Street took cellphone pictures of “racist posters involving monkeys and apes.”

The meeting held between Tingling and his administrative judge, Justice Sherry Klein Heitler, in late July or early August, set off a chain of events which led to the forced resignation of Chief Deputy County Clerk James A. Rossetti the following December. Rossetti had been the top aide and heir apparent to New York County Clerk Norman Goodman, who, now 90, has held the post for the past 45 years. Rossetti had been the number-two man in the office since 1985.

There has been a near news blackout on the events, which led to Rossetti’s dismissal and upended the expected line of succession in the County Clerk’s Office. The New York County Clerk serves one of the most important, and busiest, trial courts in New York State. His office is the custodian of court files for the Supreme Court in Manhattan and performs a vital function in processing court rulings into legally enforceable judgments and orders. The office is also responsible for assuring the smooth flow of jurors to trial courtrooms throughout the borough.

The only news story, prior to the one in the union newsletter, to appear on Rossetti’s departure ran in the New York Law Journal on Dec. 18, two days after Rossetti had submitted his resignation ahead of a deadline set by Deputy Chief Administrative Judge Fern A. Fisher, according to a source close to Rossetti. Citing unnamed sources, the seven-paragraph item reported that Rossetti had resigned rather than accept a suspension and demotion.  According to the article, a report compiled by the court system’s Inspector General’s Office found that he had been lax in responding to the offending images and had “mis [led]” investigators. The Inspector General’s (IG) report found that Rossetti was not responsible for posting the images. The union newsletter did not identify Rossetti by name, but referred to him by his title, “Deputy County Clerk.”

The Office of Court Administration refused the Law Journal access to the Inspector General’s report, which was based upon an investigation that spanned several months. David Bookstaver, OCA’s spokesman, has continued to maintain that stance, saying all information relating to the disciplining of court employees is confidential and not subject to release to the public.

There is much that was left unsaid in the anodyne information given to the Law Journal. There was no mention of Tingling’s involvement; nor that two other County Clerk employees were disciplined along with Rossetti; nor that District Council 37 either joined OCA or, on its own initiated, the IG investigation; nor of the harsh manner in which Rossetti was treated, including that he was reportedly disciplined without being given a copy of the IG report or a meaningful opportunity to defend himself.

The new information I have come across creates many unanswered questions. What did Rossetti do to warrant punishment? Was the punishment proportionate to what he had done? How and why did Tingling become involved? Did the question of Goodman’s successor have any bearing on the way events unfolded?

In the absence of official information, I have been limited to sources, who have asked not to be identified. I have spoken to sources both inside and outside the court system. Some of the outsiders are close to Rossetti and others to Tingling. The two principal players both come with political pedigree from Harlem. Tingling’s father, Milton Tingling Sr., was also a Supreme Court Justice elected in Manhattan, and Rossetti is related to Frank G. Rossetti, a Democratic politician from East Harlem, who was the Democratic Party leader of Tammany Hall from 1967-77.

My tentative read on the information that has become available is that it is more likely than not that Rossetti misled his superiors; that his treatment was overly harsh and his punishment possibly so; and that Tingling had no ulterior motive for bringing the photographs to Heitler’s attention. Likewise, my reporting found no basis for concluding that OCA’s actions were influenced by the looming question of who will be Goodman’s successor. That decision will ultimately be made by the Appellate Division in Manhattan.

What Did Rossetti Do?

On the morning that Tingling called Heitler to report the offensive images in the records room, Heitler convened a meeting in her chambers, which included Rossetti, Tingling and John Werner, the chief clerk at 60 Centre Street, according to sources. She dispatched Rossetti to the records room to see what was there. He reported back that he did not see anything offensive, several sources reported.

Court employees had first started posting photographs and articles on the wall after the Sept. 11 attack, focusing on court workers who had been involved in the rescue effort. Over the years the postings had grown to include many others, including a photograph of President Obama and the First Lady on election night. The number of postings had grown into the hundreds, one source said. Two sources said that Rossetti had ordered all the postings taken down when he inspected the wall for Heitler.

Given the inflammatory nature of the images, it is possible that someone may have discovered them that morning and ripped them down. Many of the workers in the records room are black and may well have been outraged upon discovering the posts. But that scenario does not seem plausible for two reasons. First a source, who had no connection to either side, but had access to the area behind the counter, told me that the offensive post, bearing the N-word, had been on the wall for “quite some time.” Secondly, someone from behind the counter apparently had taken the photographs and forwarded them to Tingling, which suggests that was the route of redress the workers had taken. That notion is reinforced in the union newsletter’s report that “several workers at 60 Centre Street” took cellphone photographs of “racist” images involving “monkeys and apes.” The newsletter article did not state, however, that those cellphone photographs had been forwarded to Tingling’s cellphone.

Also, several sources told me that two workers, in addition to Rossetti, were caught up in the IG investigation. One of them, Joseph Antonelli, a 44-year veteran, who had been chief clerk of the office’s Court and Records Division, reportedly was pressured to resign in January 2014, earlier than he had planned. The other, Midgalia Ruiz, was the supervisor of the workers responsible for retrieving court files for the public. Near the outset of the IG investigation, Ruiz was re-assigned from the records room to a County Clerk’s office in the nearby Surrogate’s Court. Ruiz agreed, according to sources, to accept a suspension and a demotion. The union that represents her, the Civil Service Employees Association, did not return a phone call asking for a comment on her behalf.

Several sources describe a tense relationship between Ruiz and the workers under her. That suggests a management problem that may have gone unaddressed in the office.

It is unclear precisely when the union became involved. Cliff Koppelman, the president of the DC 37 local that represents the records room workers, confirmed that it had filed a complaint, but refused to comment further.

The article in the union newsletter, however, states that the IG investigation began after several union members went “to the union and state Supreme Court Justice Milton Tingling” to complain about “racist pictures and posters on the walls of the New York County Clerk’s record room.”  Koppelman was quoted in the article as saying that several union members from the record room “came forward to testify before the IG about the situation.”

My impressions related above come with a caveat. Without access to the IG report there may well be significant information that I am unaware of. Also, the information I have obtained raises other questions that I can not answer. For instance, other than rank speculation, there is no explanation as to why Rossetti would have withheld information from Heitler.

Further, the Law Journal’s unofficial report leaves unanswered the question of whether the IG report reached a conclusion as to who posted the offensive images. The article does state, however, that investigators concluded that Rossetti was not responsible. The message of the phrases written on the two illustrations was clearly out of bounds. But the use of puerile, street talk is just plain weird.

Rossetti’s Treatment and Punishment

When the IG report was complete, Fisher, the administrative judge in charge of courts within New York City, summoned Rossetti to an 11 a.m. meeting in her chambers at the New York County Civil Court on Friday, Dec. 13. At the meeting, she informed Rossetti that OCA had decided that he should receive a 90-day suspension without pay, a demotion that would slice $16,000 off his $144,000 annual salary and a new assignment in a borough outside Manhattan. Rossetti had no civil service or union protection. According to sources, Rossetti was not given a copy of the IG report and merely told that court officials had “lost confidence” in his ability to manage the office.

Fisher gave Rossetti until 5 p.m. the following Monday to advise her whether he was willing to continue to work at the office under those conditions. At the conclusion of the meeting Rossetti was instructed to return to his office and collect his personal belongings.  A court officer, in civilian clothes, then escorted Rossetti back to his office in the Supreme Court two blocks to the south on Centre Street and accompanied him as he collected his belongings and exited the building. Rossetti’s pay was suspended immediately.

On Monday, Dec. 16, Rossetti tendered his resignation. Rossetti was 58 at the time, which meant that his forced resignation was costly even though he had worked for the County Clerk’s Office for 28 years. The state pension system imposes a significant penalty on employees who are less than 62 when they retire with less than 30 years of service.

This narrative is mainly provided by a source close to Rossetti, but many workers in the County Clerk’s Office saw Rossetti being escorted out of the office.


Tingling’s Involvement

 Despite suggestions from the Rossetti camp that the proceeding against him had been “a very strange hanging,” no one pointed to anything the least bit untoward in Tingling’s actions. As best I can tell, he did what any person would do when receiving the information that he did—he reported it to his administrative judge. Indeed, he probably would have been derelict if he had not reported it.

A source close to Tingling said that last fall, when the IG investigation was in full swing, Tingling had told persons in the courthouse that he was interested in the job. A second source inside the courthouse also told me that a rumor was widespread that Tingling was interested in succeeding Goodman. But, subsequently the source close to Tingling said that he was no longer interested in becoming County Clerk.

Moreover, since the rumors surfaced at least two months after Tingling’s meeting with Heitler, there is nothing to suggest that Tingling had a motive to do anything other that report the photographs in an effort to get them taken down as quickly as possible.

When I questioned Tingling about the rumors, he stopped short of giving me a straight out denial. He acknowledged hearing the rumors, and said, “I am running for re-election. My sole objective is to be reelected to the Supreme Court.” Tingling’s 14-year term expires this year and he is running for a second term.

A Sense of Mistreatment

During his many years as the go-to person at the County Clerk’s Office, Rossetti was highly regarded by lawyers and judge alike as helpful, competent and professional. Several sources said that his punishment was too harsh even assuming the accuracy of the Law Journal report that the IG office concluded that Rossetti had misled investigators.

A retired judge, who said that over the years Rossetti had smoothed out problems for many judges, suggested the punishment was disproportionate. “Why couldn’t [OCA] have gone to him and said, ‘Hey, schmuck, don’t do this again?’ ”

A court insider said that the “administrators downtown should have found a better way of working this out without trashing the careers of two valued and veteran employees.”

Two court insiders expressed dismay over the way the matter had been handled by OCA. One insider likened Rossetti’s treatment to the “star chamber” in that he “was let go after so many years without ever being told what the issue was.”  The other said it was “shocking” that a court official at Rossetti’s level could be forced out of office without having any due process rights to defend himself.

A managing attorney at one of the city’s most prestigious firms saw irony in no due process being given to a top official in a courthouse, which is revered as a ‘Hall of Justice.’ ”

Edited by Cerisse Anderson





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Wise in The Nation: Scheindlin’s Ouster Sets Dangerous Precedent

First published in The Nation ( on Jan. 8

Removing the Judge Who Ruled ‘Stop and Frisk’ Unconstitutional Is a Blow to Justice
Dan Wise | January 8, 2014

Three days before he was sworn in as New York City’s 109th mayor, Bill de Blasio announced he would drop the city’s appeal of Judge Shira Scheindlin’s ruling finding the NYPD’s aggressive stop-and-frisk tactics unconstitutional.
That was good news for New Yorkers. Nearly 90 percent of the 4.4 million people the police stopped for questioning between 2004 and 2012 had done nothing wrong, according to evidence presented at a nonjury trial Scheindlin conducted last spring.

But the announcement leaves in limbo a devastating ruling by a federal appeals court panel, which removed Scheindlin as the judge presiding over challenges to the NYPD’s stop-and-frisk policing since 1999. The removal order was a crushing blow to Scheindlin’s professional standing and sent a chilling message to other judges: tread carefully when handling cases that challenge government action.

Scheindlin issued two rulings last August. One found the NYPD’s stop-and-frisk procedures unconstitutional, and the other ordered the city to implement reforms under the supervision of a court-appointed monitor.
The class plaintiffs in the stop-and-frisk challenge have asked the entire Court of Appeals for the Second Circuit to review the removal order, issued by a three-judge panel of the court. But given the legal posture of the case—a new judge has already been assigned to preside over it, and the panel has ordered the request for review held in “abeyance”—it is likely the full-court review will never take place.

Should the panel’s removal order remain on the books, it would set a terrible precedent. The court’s removal of Scheindlin even before it decided the appeal was very likely unprecedented. Moreover, the ruling was so marred by departures from customary practices as to raise questions about the panel’s neutrality.
In a sign of undue haste at a court known for its attention to detail, the unsigned ruling contained a glaring error, which the three judges were forced to correct two weeks later. Further, the panel removed Scheindlin even though the city never sought her removal in the case; the panel then faulted her for taking a step the city had not objected to six years earlier—and it did so in a manner that precluded her from defending herself from the suggestion that she had been unethical.

Research by University of Virginia Law School professor Toby Heytens, soon to be published in the Stanford Law Review, underscores the aberrant nature of the panel’s removal order. Heytens found that appeals court replacements of trial judges have been highly unusual. More important, he did not find a single case issued by any of the nation’s thirteen federal circuit courts in which removal was required before an appeal had been decided on the merits.

That does not mean the city didn’t have a route to seek Scheindlin’s removal. It could have asked her to recuse herself; if she refused, it could have taken the issue to the Second Circuit, where it would have had to demonstrate her bias, and she would have had an opportunity to defend herself.

The importance of having such an opportunity is underscored by the way the circuit’s initial order was drawn. Scheindlin’s replacement was required, the panel wrote, because she “ran afoul” of her ethical duty to maintain the “appearance” of fairness. Two weeks later, the panel rolled back its misconduct finding, but the revised order did not remove the stain on Scheindlin’s reputation, and despite the softer formulation, the panel did not back off its removal. Why insist on what the court’s own precedents describe as an “extraordinary remedy” if her conduct was not serious enough to warrant it?

Nor were the panel’s reasons for removing Scheindlin persuasive. It faulted her for suggesting to the challengers in 2007 that they file a new “related case” rather than extending a 1999 settlement. In an exception to the standard practice of randomly assigning cases, a court rule permitted Scheindlin to handle both cases as long as they were related. The two cases were in fact closely intertwined. The 1999 case had been settled, and the one Scheindlin suggested be filed as “related” aimed to build on the earlier agreement by using data it generated to prove that rules it required had been ineffective in curbing unconstitutional stops.

The panel also wrote that Scheindlin had signaled bias against the city in her remarks to reporters during the trial. In the most controversial one, she told The New Yorker that “too many” of her peers who had previously worked as federal prosecutors in Manhattan had become “government judges.” That comment undoubtedly riled many former prosecutors now on the bench, but the point she was making was that she treated all litigants equally.

If the panel’s removal of Scheindlin stands, it could jeopardize a prized heritage. Since the mid-twentieth century, federal trial judges have dismantled Jim Crow and other, more recent laws that sanctioned discriminatory patterns affecting housing, schools and the right to vote. They have also tackled abysmal conditions in jails, mental hospitals, homeless shelters and foster care.

Many of those rulings generated public outrage because they ran against ingrained social norms and required public funds to remedy constitutional violations affecting the poor and powerless. Perhaps no federal judge faced more venomous attacks than Frank Johnson Jr., who issued dozens of decisions remedying racial discrimination in Alabama. Segregationist Governor George Wallace branded Johnson an “integrating, scalawagging, carpet-bagging liar.” Crosses were burned on his lawn twice, and his mother’s home was bombed. Johnson had twenty-four-hour federal protection for fifteen years. But could he have persisted if he had faced a hostile circuit court armed with the power to remove him from cases with the stroke of a pen?
Read Next: Emily Jane Goodman on how the Bloomberg administration tainted Judge Scheindlin’s reputation [2].

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